Robinson v. The Best Service Co., Inc.

ORDER DENYING DEFENDANT'S MOTION FOR FINDING OF
BAD FAITH AND HARASSMENT AND FOR AWARD OF ATTORNEY FEES Re:
Dkt. No. 38

EDWARD
J. DAVILA United States District Judge

I.
INTRODUCTION

Plaintiff
Jefferson Robinson (“Plaintiff”) alleged in this
action that Defendants TransUnion, LLC and The Best Service
Company, Inc. (“Best”) violated the Fair Credit
Reporting Act (“FCRA”), 15 U.S.C. §
1681s-2(b), and the California Consumer Credit Reporting
Agencies Act (“CCRAA”), California Civil Code
§ 1785.25(a), by inaccurately reporting credit account
information after the confirmation of a bankruptcy
reorganization plan. In response to Plaintiff's
Complaint, Best moved for dismissal or, in the alternative,
for summary judgment. Dkt. No. 18. Plaintiff did not submit
argument or evidence in opposition to the motion for summary
judgment, and the court denied the motion to dismiss but
granted summary judgment to Best on both of Plaintiff's
claims. Dkt. No. 35.

Best
contends this action was initiated and maintained and in bad
faith, and now moves pursuant to Federal Rule of Civil
Procedure 54(d)(2)(A) for an award of attorney's fees.
Dkt. No. 38. Plaintiff, unsurprisingly, disagrees and opposes
the motion.

Federal
jurisdiction arises pursuant to 28 U.S.C. § 1331.
Plaintiff's claims against Best were, if anything,
misguided and poorly researched, and the performance of
Plaintiff's counsel was less than ideal. That said, the
court cannot find on this record that either Plaintiff or his
attorneys engaged in sanctionable conduct. And though
Plaintiff's counsel should not be comforted that this
determination somehow vindicates the decision to pursue this
and hundreds of other similar cases based on oftentimes
questionable factual allegations and legal theories,
Best's motion will be denied for the reasons explained
below.

II.
DISCUSSION

Best
cites three legal bases for its request for fees: (1) 15
U.S.C. § 1681n(c) of the FCRA; (2) the “bad
faith” exception to the American Rule against
attorney's fees; and (3) Federal Rule of Civil Procedure
11. Each basis is discussed in turn.

A.
15 U.S.C. § 1681n(c)

Section
1681n(c) of the FCRA provides:

Upon a finding by the court that an unsuccessful pleading,
motion, or other paper filed in connection with an action
under this section was filed in bad faith or for purposes of
harassment, the court shall award to the prevailing party
attorney's fees reasonable in relation to the work
expended in responding to the pleading, motion, or other
paper.

District
courts have construed the term “bad faith” in the
context of § 1681n(c) to require “either that the
party subjectively acted . . . knowing that he had no viable
claim - or that he filed an action or paper that was
frivolous, unreasonable, or without foundation.”
Ryan v. Trans Union Corp., No. 99 C 216, 2001 U.S.
Dist. LEXIS 1239, at *15, 2001 WL 185182 (N.D. Ill. Feb. 26,
2001). Additionally, “[t]he statute requires a showing
that a document was filed in bad faith;” it
does not “impose an obligation to withdraw or revise a
pleading or motion that later turned out to be
baseless.” Id. at *17 (emphasis preserved);
Smith v. HM Wallace. Inc., No. 08-22372-CIV, 2009
U.S. Dist. LEXIS 125885, at *5, 2009 WL 3179539 (S.D. Fla.
Sept. 9, 2009).

District
courts have also held that § 1681n(c) “does not
authorize the imposition of attorneys' fees on a
party's counsel, ” but only on the plaintiff
himself or herself. Smith, 2009 U.S. Dist. LEXIS
125885, at *5; accord Lewis v. Trans Union LLC, No.
04 C 6550, 2006 U.S. Dist. LEXIS 76242, at *7, 2006 WL
2861059 (N.D. Ill. Sept. 29, 2006); Arutyunyan v. Cavalry
Portfolio Servs., No. CV 12-4122 PSG (AJWx), 2013 U.S.
Dist. LEXIS 29901, at *5, 2013 WL 500452 (C.D. Cal. Feb. 11,
2013). Consequently, the scope of the § 1681n(c) inquiry
is properly limited to an examination of Plaintiff's
conduct, rather than conduct attributed to his counsel.
See Lewis, 2006 U.S. Dist. LEXIS 76242, at *8-9;
see also Arutyunyan, 2013 U.S. Dist. LEXIS 29901, at
*6.

Here,
Best argues that Plaintiff knew or should have known he could
not prove a FCRA or CCRAA claim against Best because it did
not receive notice of Plaintiff's dispute, as required by
15 U.S.C. § 1681s-2(b) and California Civil Code §
1785.25. Although Best ultimately prevailed in this action
based on that contention, it has not explained exactly how
Plaintiff knew or could have known of the notice defect at
the time he filed the Complaint. Plaintiff alleged that he
notified the credit reporting agencies (“CRAs”)
of the disputed information on his credit report. The
notification triggered the CRAs' duties under 15 U.S.C.
§ 1681i(a)(2), requiring them - not Plaintiff - to then
notify the furnishers of the dispute. Notably, Plaintiff did
not allege any personal contact with Best or any of the other
furnishers of credit information, and could not have
otherwise known that Best did not receive notice of his
dispute from the CRAs without undertaking discovery on the
topic or, as eventually occurred here, receiving a
communication from Best. Though Plaintiff could have made a
pre-filing demand and potentially learned of the notice
deficiency sooner, or could have voluntary withdrawn his
claims after receiving information from Best's counsel,
neither action is required to avoid a sanction under §
1681n(c). Under these circumstances, the court cannot find
that Plaintiff filed the Complaint knowing that he had no
viable claim against Best.

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